Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.2E
Change in principle; change in inventory methods
• LO20–2
Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2018. The inventory as reported at the end of 2017 using LIFO would have been $60,000 higher using FIFO.
Required:
- 1. Calculate the balance in retained earnings at the time of the change (beginning of 2018) as it would have been reported if FIFO had been used in prior years.
- 2. Prepare the
journal entry at the beginning of 2018 to record the change in accounting principle.
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Exercise 20-1 (Algo) Change in principle; change in inventory methods [LO20-2]
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and
tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes.
Income components before income tax for 2019, 2020, and 2021 were as follows:
($ in millions)
Revenues
Cost of goods sold (FIFO)
Cost of goods sold (average)
Operating expenses
2019 2020
2021
$50
$ 460 $47
(46)
(68)
(274) (282) (286)
(54)
(48)
(72) (78)
Dividends of $27 million were paid each year. Fieri's fiscal year ends December 31.
Required:
1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.)
2. Prepare the 2021-2020 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the…
Exercise 20-1 (Algo) Change in principle; change in inventory methods [LO20-2]
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial report
tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purp
Income components before income tax for 2019, 2020, and 2021 were as follows:
($ in millions)
2019
2020
2021
$ 520 $ 550
(59)
(88)
(306)
Revenues
Cost of goods sold (FIFO)
Cost of goods sold (average)
Operating expenses
$ 510
(51)
(78)
(294)
(53)
(82)
(302)
Dividends of $32 million were paid each year. Fieri's fiscal year ends December 31.
Required:
1. Prepare the journal entry at the beginning of 2021 to record the change in accountin
2. Prepare the 2021-2020 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the
adjustment of balance in retained earnings…
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Chapter 20 Solutions
Intermediate Accounting
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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